* Graphics: World Currency Rates in 2020 https://tmsnrt.rs/2RBWI5E
By Julien Ponthus
LONDON, May 21 (Reuters) – Euro was set for a fifth consecutive payday on Thursday as optimism about a closer fiscal union in Europe remained high among investors as severe economic data did not change the stance amid US-China tensions.
The block’s currency is gradually pairing its early losses against the dollar to briefly reach a three-week high of $ 1.10, while the cost of betting against the downside of the euro in the options markets also fell further to new mid-March lows.
France and Germany on Monday proposed a $ 500 billion recovery fund. Euro ($ 543 billion) to provide grants to regions and sectors most affected by the coronavirus pandemic, raising hopes that European policy makers are taking more decisive steps to tackle the economic damage.
The news lifted the euro from the $ 1.08 levels, where it has weakened in the past two months, pushing it toward $ 1.10, although the single currency remains more than 4% away from the 2020 highs of $ 1.15 levels, that were tested in early March.
“The Ascension holiday has become thinner with liquidity, and with the euro / dollar already back below 1.10, investors will wait for confirmation of any breach of these levels in the next few sessions,” said Jane Foley, a senior strategist at Rabobank.
The latest economic data again showed the devastating effect of coronavirus on the euro area economy, but did not weigh on the currency.
After breaking down to what was by far the lowest reading in the survey’s nearly 22-year history last month, the IHS Markets Flash Composite Purchasing Managers’ Index, considered a measure of financial health, was recovered to 30.5 from April 13.6.
“The big picture is that the index is in line with economic activity in the region, which remains very depressed, even though decommissioning measures are gradually being lifted,” said Jessica Hinds of Capital Economics.
While the business downturn in France and Germany eased to some extent, however, the data was less favorable than expected. UK PMI data showed the economy flattened out slightly this month from April’s nosedive.
The pound, which remains under pressure as weak inflation drives speculation the Bank of England may lower its interest rates below zero, pared some losses after PMI data was released.
Sterling fell 0.03% to $ 1.2233.
“Some improvement in UK numbers has strengthened the pound,” said Chris Beauchamp, Chief Market Analyst at IG.
With risk appetite wide on the back foot, the U.S. dollar fell 0.12% to 99.06 against a basket of its rivals, while the U.S. stock futures traded with the red like China-USA. trade tensions swirled in the background.
Diplomatic relations between the world’s two largest economies have increased over the past few weeks with the U.S. President Donald Trump attacks China’s handling of the coronavirus outbreak.
The latest salvo came when Trump took to Twitter late Wednesday to accuse China of a “massive disinformation campaign” trying to hurt his reelection options, “so they can continue to obliterate the United States.”
The dollar was slightly lower, falling 0.16% against the yuan in land trading to 7,1001.
(Reporting by Julien Ponthus; Editing by Mark Heinrich / Pravin Char / Jane Merriman)